Can You Add FSA After Open Enrollment?

A Flexible Spending Account (FSA) is an employer-sponsored benefit allowing individuals to set aside pre-tax money from their paycheck for eligible healthcare or dependent care expenses. Contributions are exempt from federal income, Social Security, and Medicare taxes, reducing taxable income. FSAs help manage anticipated out-of-pocket medical costs like deductibles, co-pays, and prescription medications, or cover dependent care services.

Understanding Open Enrollment and FSA Eligibility

The standard period for employees to elect or make changes to their Flexible Spending Account is during open enrollment. This annual window, typically held in the fall, is the primary opportunity to decide on FSA participation and contribution amounts for the upcoming plan year. IRS regulations generally dictate that elections made during open enrollment are irrevocable for the entire plan year. This rule ensures the tax-advantaged nature of FSAs, which are designed for pre-planned expenses. Consequently, changes to FSA elections are generally not permitted outside this period.

Specific Events Permitting Mid-Year FSA Changes

While FSA elections are generally fixed for the plan year, certain “qualifying life events” (QLEs) allow individuals to make mid-year changes or even enroll in an FSA outside of open enrollment. These events, defined by IRS Section 125, reflect significant changes in an individual’s personal or family circumstances that affect their healthcare or dependent care needs. These events often alter household income, expenses, or insurance coverage, justifying a review of FSA contributions.

Common QLEs include:
A change in legal marital status, such as marriage, divorce, legal separation, or the death of a spouse.
Changes in the number of dependents, including the birth or adoption of a child, placement for adoption, or the death of a dependent. The arrival of a new child introduces new medical or dependent care costs.
A change in employment status for the employee, spouse, or dependent that affects benefits eligibility. This includes starting or terminating employment, switching from full-time to part-time, or returning from an unpaid leave of absence.
A dependent satisfying or ceasing to satisfy eligibility requirements, such as a child reaching age 13 and no longer qualifying for a Dependent Care FSA.
For Dependent Care FSAs, changes in a child care or elder care provider, or significant changes in their cost or coverage.

Initiating an FSA Election Change

Upon experiencing a qualifying life event, initiating an FSA election change requires prompt action and specific procedures. The first step involves notifying the employer’s Human Resources department or benefits administrator as soon as possible. Most plans require changes be reported within a strict timeframe, typically 30 or 31 days from the date of the qualifying event. Missing this deadline can result in the inability to make the desired change for the remainder of the plan year.

To substantiate the qualifying life event, employers generally require specific documentation. This can include a marriage certificate for a change in marital status, a birth certificate or adoption papers for the addition of a dependent, or a divorce decree for a legal separation. For employment status changes, a letter from the employer or other official documentation. It is important that the requested change in FSA election is “consistent” with the qualifying event; for instance, a marriage would permit adding a spouse’s expenses, but not necessarily a reduction in contributions without a corresponding change in need. The employer’s specific plan document, often referred to as the Summary Plan Description, outlines which QLEs are recognized and the exact procedures for requesting changes.

Effect of a Mid-Year FSA Election Change

Once a mid-year FSA election change is approved, the effective date of the adjustment is the first day of the month following the date the change request is submitted. However, for certain events like the birth or adoption of a child, the change may be retroactive to the date of the event itself, allowing expenses incurred from that date to be covered. Contributions to the FSA will then be prorated for the remainder of the plan year based on the new election amount.

This means the total annual election is divided by the number of remaining pay periods to determine the new per-paycheck deduction. The change must align with the nature of the qualifying event; for example, if a qualifying event leads to a reduction in eligible expenses, the FSA election would be decreased, not increased. While employers have some discretion in how they implement these changes, the fundamental rule is that the adjustment reflects the changed circumstances of the qualifying life event.